Feds Will Seek Forfeiture of Around $10 billion From SAC

The government will seek forfeiture of around $10 billion from SAC Capital Advisors in its insider-trading case against the firm, according to a person familiar with the matter.

In a civil complaint made public Thursday, the U.S. Attorney’s office in Manhattan said it is seeking the forfeiture of “any and all” of the firm’s assets but didn’t detail the amount. The firm has about $14 billion in assets, but that number is declining following requests by investors to pull some $5 billion from the firm already this year, according to people with knowledge of the matter.

More than $8 billion of SAC’s roughly $14 billion in assets belongs to Cohen and SAC employees.

U.S. Attorney Preet Bharara said at a press conference about the case Thursday that the government is mindful of the impact of charges on third-party investors, and is working with the firm to protect clients’ money. He declined to say how much the government would seek in forfeiture or whether it would seek clawbacks from investors.

“We have not today restrained any money,” Bharara said, adding the government will discuss with the company a “reasonable method” to protect all interested parties.

Courts have well-established the government has the ability to “restrain entities’ use of funds,” said C. Evan Stewart, a litigation partner at law firm Zuckerman Spaeder LLP.

Investors who haven’t been accused of any wrongdoing should remain free to negotiate redemptions with SAC based on previous contractual agreements without government interference, Stewart said.

“The money that outside investors have, that’s their money, that’s not Mr. Cohen’s money or the government’s money,” Stewart said. “Innocent investors—they’re entitled to their money. I presume the government has an interest in making sure those people are protected.”

Prosecutors accused SAC Capital and its business units of a total of four counts of securities fraud and one count of wire fraud. The government’s complaint called the alleged insider trading “substantial, pervasive and on a scale without known precedent.”

In a civil complaint, the government alleged that SAC put illicit profits it made back into its funds in a cycle that perpetuated the alleged schemes.

“As a result of the systematic and pervasive insider trading directed by employees of the SAC Entity Defendants over many years, illicit profits from insider trading were commingled with legitimate proceeds and formed at least part of the funding of additional insider trading,” the civil complaint said.